FSA seeking almost £580m industry funding

The City watchdog said its costs had risen from £500.5m in 2011/12 to £578.4m for 2012/13, reflecting the cost of regulatory change under the Financial Services Bill.

A statement from the FSA said: “In addition to the funding of its core programme a significant part of the increase in this year’s AFR reflects the costs of implementing the government’s reform of the UK regulatory framework.

“The current £32.5m costs for the restructuring are within the overall estimates set by HM Treasury last year, which equates to 28 per cent of the increase in AFR.”

The FSA said the AFR would also cover the costs of modernising its IT infrastructure to ensure it is a suitable platform before the transition to the FCA. It said this would require a £22.4m increase in the AFR, which equates to 29 per cent of the increase in AFR.

The regulator claimed the increase in fees would be borne mainly by larger firms. It said currently 42 per cent of the FSA’s authorised firms need only pay the FSA minimum fee and for the third year running the gross minimum fee for firms would remain unchanged at £1000.

The FSA said any enforcement fines imposed during the previous year would be returned in the form of discounts to next year’s fees.

This year, anticipated financial penalties are estimated to be £58.7m, the FSA said.

Hector Sants, chief executive of the FSA, said: “The year to April 2013 is expected to be a challenging one for the FSA.

“We will be moving to a twin peaks model internally ahead of the split into the PRA and FCA, whilst at the same time continuing to focus on our supervisory role in a very difficult economic environment. We are mindful of any increase in costs to industry and have continued to maintain headcount and keep core operating costs in line with inflation.”

Mr Sants said much of the increase was due to the regulatory changes.

He added: “The FSA will continue to deliver intensive and intrusive supervision and develop the key policy initiatives but we are not planning any new discretionary initiatives. The principal initiatives are progressing the domestic consumer protection strategy, implementing a number of key EU directives and influencing the continuing international regulatory reform agenda.”

Fee-payers will be invoiced from March 2012 for ‘on-account’ payments, and other firms will be invoiced from June onwards.